RegTech Intelligence 
The Joint Committee of the European Supervisory Authorities has published a consultation paper on 11 November 2015 which sets out the draft regulatory technical standards (RTS) concerning the Key Information Documents (KID) for PRIIPs.
After much debate and the publication of a general discussion paper (November 2014) and a technical discussion paper (June 2015), the proposed text has been confirmed. This draft RTS sets out to represent feedback from stakeholders, as well as providing some much needed clarity about the implementing standards for the PRIIPs KID regulation.
From the text of the RTS, seven key requirements can be discerned.
- A mandatory template
One of the most interesting aspects of the draft RTS has been the inclusion of a mandatory template for each KID. Annex 1 includes a standardised format which specifies the headings that must be used by PRIIPs manufacturers when selling or advising on packaged retail and insurance-based investment products. The idea behind the KID is to provide consumer-friendly information to retail investors which allows them to easily compare these products across the EU, whether offered by banking, insurance or securities firms.
- Risk indicator
In terms of the fixed content, the draft RTS sets out that there must be the inclusion of a summary risk indicator that is comprised of seven classes. This must be accompanied by a corresponding methodology that outlines the reasoning for assigning each PRIIP to one of these seven classes.
- Performance scenarios
Another important aspect that is prescribed for under the ‘what are the risks and what could I get in return?’ section of the RTS involves the presentation of at least three different performance scenarios within a table. These represent the possible financial outcomes of the product and they must cover an unfavourable scenario, a moderate scenario and a favourable scenario.
- Cost analysis
The presentation of costs is another essential requirement set out in the RTS. The text prescribes the specific measurements and calculations necessary for adhering to the mandatory structure. These should include a breakdown of the different cost components, aggregated cost figures and a presentation of the accumulation of the costs in monetary and percentage terms.
- Multiple options
The draft RTS has also included a consideration of occasions where there are multiple products and the KID cannot contain the relevant information within the specified three pages. In this scenario, there are two different approaches given. The PRIIP manufacturer can either:
- create a separate KID for each option, which outlines the PRIIP in general terms but contains specificities about the particular option or;
- they can separate the information that would normally be in a single KID. This would include a generic KID for the PRIIP in general and the additional information surrounding the particular options could be accounted for in a separate document or documents.
- Revision and republication
It has been specified that the KID must be republished at least annually. Within this period, there is also an obligation to carry out ad hoc revisions of the information contained therein. This is necessary as the performance scenarios and the costs can be subject to change and the revisions must encompass these developments. However, where there are no alterations to be made, it can be argued that this requirement could prove burdensome for PRIIPs manufacturers as it could represent a costly and time-intensive compliance obligation.
- Early provision
It is also set out in the requirements of the draft RTS that the KID must be provided at a sufficiently early stage, in order to allow the retail investor an opportunity to consider all the details before making an investment decision. This timing requirement can vary depending on the needs of the retail investor and the PRIIP in question.
The specifications contained in the draft RTS and the inclusion of a mandatory template has undoubtedly created clarity for PRIIPs manufacturers in relation to Key Information Documents. However, it remains to be seen whether the requirement to be concise will prove to be conducive or constrictive over time – it could prove difficult to compile all the relevant information within the prescriptive format. PRIIPs manufacturers must now prepare by getting to grips with the terms of the Key Information Documents and ensuring that they put in place specific systems designed to ensure that they meet all of their compliance obligations.